In 2016, GW Pharmaceuticals plc (GWPH) put the medical cannabis industry on the map when it reported positive data from a US Food and Drug Administration (FDA) Phase 3 clinical trial. The Phase 3 clinical trial was on Dravets Syndrome (which is a serious form of epilepsy) and the market rewarded GW with a much higher stock price as a result of the positive data.
Fast forward to 2020 and GW is valued at more than $4 billion by its market capitalization (as of November 25th) and generates more than $100 million of revenue per quarter. The advancement of the Nasdaq traded biotech cannabis company over the last decade has been impressive and many analysts are trying to determine which company will be the GW of the psychedelic therapy industry.
Currently, there are three psychedelic therapy companies that are conducting Phase 3 FDA clinical trials. In 2021, we expect these companies to announce results from these studies and believe that at least one of the firms will report positive data. The companies that are some of the first to reach this milestone will most likely follow a path that is similar to GW.
One of the reasons we are favorable on the potential for a company to be the GW of the psychedelic therapy industry is related to the impact it will have on the capital raising process. After GW reported positive Phase 3 data, there was a large increase in the average size of its capital raises. Also, the amount of interest in the financings increased exponentially and GW had no issue at raising capital for additional therapies in its clinical trial pipeline.
When it comes to the psychedelic therapy market, we are focused on companies that are developing treatments that have a large total addressable market. We also prefer companies that have put a major emphasis on the development of an intellectual property (IP) portfolio and on the importance of human capital.
For companies that are in the pre-clinical and/or clinical trial process, the market cares less about quarterly financial results and more about data that supports the study. For these early-stage companies, positive clinical trial data can prove to be a gamechanger on the capital markets side of the business. Due to this, we tend to prefer companies that own valuable IP and are led by a team that has previously brought therapies through the FDA clinical trial process and to market.
We believe that 2021 will be a banner year for the psychedelic therapy market and are focused on a handful of companies that are executing on a strategy to become the GW of the sector. If you are interested in learning more about these companies, please send an email to email@example.com with the subject “Psychedelic Therapy Companies” to be added to our distribution list.